Why India is so optimistic right now

India's Prime Minister Narendra Modi reacts as he speaks to members of the Australian-Indian community during a reception at the Allphones Arena located at Sydney Olympic Park in western Sydney November 17, 2014. REUTERS/Rick Stevens

Americans suffering a crisis of confidence about the future of their country's democratic institutions under President Donald Trump could use a dose of Indian-style optimism. Prime Minister Narendra Modi, elected on a populist platform in 2014, has just won a landslide victory for his Bharatiya Janata Party (BJP) in elections in Uttar Pradesh, India's biggest state. In his third year in office, voters have heartily endorsed his overthrow of establishment elites and pursuit of an ambitious reform agenda that is transforming the country by kindling economic growth and hope. India's experience offers a useful antidote to Western pessimism — and a reminder that democracy can offer solutions to the growth and governance dilemmas that afflict the United States and Europe.

Modi's strong approval ratings — about four in five Indians have a favorable opinion of their prime minister — combined with the BJP's remarkable victory in Uttar Pradesh, home to 200 million Indians, demonstrate that bold leadership is compatible with public support. India's sheer size and scale make it a fractious democracy — three dozen parties hold seats in Parliament, and powerful regional chieftains resist edicts from the distant capital. But the political polarization and gridlock that characterize Washington are less evident in New Delhi, in part because the prime minister won a strong mandate and is doing something with it.

India's economy is expanding at around 7 percent a year, powered by the demographics of the world's largest population of young people, but also, importantly, by "big-bang" reforms. The country is enacting a national goods and services tax that will rationalize and unify its internal market, currently broken down into 29 state markets. Doing this required revising the Indian constitution, no small task in the world's biggest parliamentary democracy.

Indian Prime Minister Narendra Modi dressed for the country's Republic Day on Monday. REUTERS/Jim Bourg

Modi's government has also liberalized foreign investment in a range of sectors, passed a bankruptcy bill to help recapitalize banks hit by bad debts, and made a revolutionary break from an economy 95 percent dependent on cash transactions by temporarily abolishing most of the currency in circulation. Although the roll-out was bumpy, this controversial reform will help transition India to a digital economy, expand tax revenues by placing more economic activity in the formal sector, and clamp down on corruption by curtailing the supply of "black money."

Through a scheme launched by the previous Congress Party-led government, India is creating a national identification number for every one of its 1.3 billion citizens. This will allow the government to provide welfare and other benefits directly to individuals without going through corrupt middlemen who, until recently, skimmed off most of the proceeds from government assistance programs.

Meanwhile, the Modi administration has helped create millions of bank accounts for poor, "unbanked" Indians who previously had no access to the financial system, and can therefore now receive government payments directly by digital transfer. The government's chief economic adviser has even flirted publicly with the idea of transitioning to a universal basic income system that would replace a hodgepodge of inefficient, individual welfare schemes — potentially creating a financial safety net for every Indian, including the poorest of the poor.

In India, voter turnout is linked to income. But unlike in the United States, poor people are far more likely to vote than those in the middle and upper classes. Rather than entrenching plutocracy, which critics claim occurs in the West through the corrupting influence of money and special interests, this has the effect of incentivizing politicians to engage with the country's grassroots, including in predominantly rural areas.

Voters queue to cast their votes at a polling station during the fourth phase of the state assembly election in Allahabad, India, February 23, 2017. Thomson Reuters

India is almost constantly holding elections, given its enormous population and the fact that only a handful of states vote at any given time. This has negative effects, including the enormous political energies expended on drives to persuade voters to vote, and on coalition-management operations rather than on governance. Many unsavory factors distort political outcomes in a country as big and poor as India: criminals run for office to avoid prosecution, money too readily washes around politics, and politicians use divisive issues of caste, religion, and ethnicity to mobilize voting blocs.

At the same time, aspirational Indian voters increasingly manifest a tendency to reward governments that deliver growth and toss out politicians who do not meet performance tests. Strong anti-incumbency instincts keep politicians on their toes. This has given rise to emergent political forces like the Aam Aadmi (Common Man) party campaign against corruption and other distorting political practices, even if its proposed governing solutions are not convincing. The ruling BJP is especially mindful of the experience of the last time it ruled India — deposed at the polls in 2004 in a shock upset, the party took a decade to recover.

The Modi administration is also pursuing an ambitious foreign policy at odds with the nativism and retrenchment evident in the West. India is doubling down on a strategic partnership with the United States, forming a quasi-alliance with Japan, expanding economic ties with Southeast Asia, Africa, and the Persian Gulf, and investing in stability in Afghanistan as that country's second-largest bilateral donor. The Modi government surprised many by signing the Paris Accord on climate change, after decades in which India saw environmental-protection issues as a way for rich countries to keep poor ones down.

Should globalization further erode in the face of protectionism and mercantilism in China and the developed world, India has perhaps the most to lose: as a poor country it has yet to harvest the fruits of integration with the global economy. India's technology sector, in particular, is at risk from potential new immigration restrictions in the United States, given the hundreds of thousands of Indians holding H-1B visas, whose talent underwrites innovation in hubs like Silicon Valley.

In short, India's economy is strong; its democracy is thriving, if still somewhat chaotic; it is ramping up foreign engagement while other countries retreat into narrow nationalisms; and it increasingly champions key pillars of the liberal world order. This is happening at the same time as economic anxieties in Europe and the United States are mounting, producing an insurgent populism that challenges democratic institutions, risks hollowing out multilateral cooperation, and undercuts support for the rules-based global order.

It would be ironic if the West steps back from global economic and political leadership at a time when India is ready to step forward as a partner in underwriting international security and prosperity.